"No Home and Full of Debt"... 5 Major Banks' Jeonse Loan Increase Soars 43% Last Year

Rising Loan Dependence Due to Intensifying Jeonse Crisis
Loan Growth Expected to Continue

[Asia Economy Reporter Kim Hyo-jin] Last year, the increase in jeonse (long-term lease) loan amounts at major commercial banks nearly expanded by 50% compared to 2019.

This indicates that the dependence on loans among low- and middle-income households living under jeonse has grown due to the sharp rise in jeonse prices caused by a drastic decrease in available properties following the amendment of the Housing Lease Protection Act at the end of July last year.

With expectations high that the jeonse shortage will continue this year, bank jeonse loans are also expected to maintain a rapid increase for the time being.

According to the banking sector on the 5th, the outstanding balance of jeonse loans at the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?stood at 105.0988 trillion KRW at the end of December last year. This is an increase of 22.3455 trillion KRW over one year since January of the same year (82.7533 trillion KRW).

The increase was 43.2% larger than in 2019, when the balance rose by 15.6058 trillion KRW from January to December.

In December last year, the outstanding balance of jeonse loans increased by 1.7596 trillion KRW compared to November (103.3392 trillion KRW), a larger increase than November’s 1.6564 trillion KRW. This contrasts with the decrease in unsecured loan balances during the same period due to strengthened regulations by banks under financial authorities’ tightening measures.

A representative from a commercial bank said, "The impact of rising jeonse prices is clearly reflected in the loan trends."

6 out of 10 Expect Jeonse Prices to Rise Again This Year

This trend is expected to continue. According to a mobile survey conducted by real estate information company Zigbang from the 7th to the 20th of last month targeting 3,230 users of its application, more than 65.5% of respondents?over 6 out of 10?predicted that jeonse prices will rise this year.

The main reasons cited for expecting jeonse price increases were 'shortage of jeonse supply (available properties)' at 54.9% and 'impact of rising sale prices' at 29.0%.

According to KB Real Estate LiveOn’s monthly housing price trends, the average jeonse price for apartments in Seoul last month was 575.82 million KRW, up 21.38% (104.6 million KRW) compared to the same period last year (474.36 million KRW). Seoul apartment jeonse prices have been rising continuously for 20 months since April 2019 (462.10 million KRW).

As the jeonse shortage intensifies mainly in apartments, even officetel jeonse prices are fluctuating. According to the Korea Real Estate Board, nationwide officetel jeonse prices rose by 0.62% in the fourth quarter of last year, more than doubling the increase from the previous quarter (0.27%).

A commercial bank official explained, "While there are regulations on jeonse loans for owners of high-priced homes or multiple homeowners, if one does not fall under these categories, jeonse loans cannot be regulated like general unsecured loans. If the market environment where jeonse prices continue to rise does not change, the trend of increasing jeonse loans will continue this year as well."

This content was produced with the assistance of AI translation services.